Friday , November 27 2020

Oil in Senegal: everything that shines is not gold (by Mohamed Dia)



From 0 to 5000 barrels per day, Senegal will receive 26% of the shares against 74% of the contractor, from 50,001 to 100,000 barrels per day, the Senegal State will receive 31% of the shares against 69% of the contracted, from 100,001 to 150,000 the state of Senegal will receive 36% of the shares, compared with 64% for the contractor, from 150,001 to 200,000, the Senegal State will receive 41% of the shares, compared to 59% for the contractor and beyond. of 200,000 barrels per day, the two parties will share the shares at a rate of 50% for each party. It should be taken into account that a barrel is equal to 159 liters. Chad, which is 10and Producer in Africa produces 120,000 barrels a day more or less what Senegal thinks to produce. With the price of a barrel on November 3, 2018 at $ 62.89, output equals $ 7,546,800 per day. If it were the Senegalese contract, we would receive 36%, which is $ 2,716,848 per day, $ 991,649,520 per year or 575,156,721,600 CFA francs per year with an exchange rate of November 2. 2018-580 The health and education budget for 2018 in Senegal is 413,211,883,251. It seems to want to rub our hands, making us think that we will become a rich nation overnight. Let's look at the case of the five largest oil producing countries in Africa to see their current socio-economic situation and see if we can dream how these countries had to do or whether we should better prepare ourselves to avoid the fate of those countries. countries.

Nigeria, the continent's largest oil producer, covers 27 percent of Africa's oil production and extraction with 2,322,000 barrels of oil per day. With a GDP of US $ 461 billion in 2018, which puts it in 27th place in the ranking of countries with the highest GDP. Despite this, we are seeing many problems arising from this black gold. The Niger Delta, being the economic heart of Nigeria, is very rich in oil and gas. Oil companies have existed since the 1950s. Oil activities have made the region less prosperous than before. According to the Amnesty report: Shell's activity largely destroyed agricultural land, a vital livelihood for the local population. People should use polluted water for drinking, cooking and washing. They eat fish contaminated with hydrocarbons and other toxins. When, each year, hundreds of oil spills and flames pollute the air, people breathe venom. People complain of respiratory problems and skin lesions.

Angola, Africa's second largest oil exporter, produces 1.8 million barrels a day, accounting for 22% of production in Africa. Despite the construction of new skyscrapers and real estate madness thanks to oil, the revenues of this black gold were very poorly allocated because these revenues were not used for the construction of roads, hospitals or investments in water. education. In Angola, 55% of the population lives on less than a dollar a day and Angola also has one of the highest infant mortality rates in the world.

Algeria is Africa's third largest oil producer, with 1,671,000 barrels per day, 19% of Africa's black gold production. Let's not forget that Algeria has more than 2 million poor families, despite a policy of large works with huge sums. When the government was criticized for these sumptuous spending, they repeated the same famous phrase that Algeria was twenty years behind in infrastructure.

Because of the conflict in Libya, Egypt ranks fourth with a daily production of 707,000 barrels, which represents hundreds of billions of dollars a year in state coffers. Despite these billion in the coffers, 25% of the population lives in poverty with a human development index of 0.69. Egypt has always benefited from US aid and a $ 12 billion IMF loan after Hosni Mubarak against drastic economic reforms. Analgesic measures were maintained to avoid national grumbling by subsidizing basic needs.

Libya is in 5th place with a daily production of 461,000 barrels of oil per day. Its economy depends mainly on oil revenues, the primary and secondary sectors almost disappeared because of oil, which accounts for almost all exports. As Libya has a small population, this has allowed Libya to have the highest GDP per capita in Africa. Since the fall of Gaddafi, Libya still can not build a stable system with the rival governments of Tobruk and Tripoli still struggling for the control of deposits and exports.

There are also other countries with significant output, such as Congo-Brazzaville, Equatorial Guinea, Sudan and South Sudan, Gabon and finally Chad in 10th place with 120,000 barrels per day.

The Dutch syndrome

Most of these countries were originally agricultural and their economy was based on cocoa, peanuts and coffee. The agricultural sector was the economic heart of these countries. When oil began to appear, these economies shifted from agriculture to oil. This was also due to the rise in the price of a barrel of oil. In general, oil revenues make other segments of the economy uncompetitive. This is called the "Dutch syndrome" because Holland was the first victim in the 1960s with natural gas exports from the gigantic Groningen countryside, which is the result of an economy dominated by unfinished financial means. economic activity. This kills other economic sectors of the economy. Unfortunately, most exporting countries, with the exception of Chad, do not escape the oil curse. We see that in sub-Saharan Africa many countries have been producing crude oil for a long time. This is the case of Gabon since 1957, Nigeria since 1958, Congo-Brazzaville since 1969, Cameroon since 1978, Ivory Coast since 1980. We also note that the common denominator of all these countries is that they are poor countries, which redistribute the income of oil very poorly. They anesthetize their population for their own benefit. This rent is often used for unproductive expenditures and we often see subsidies for gas, electricity, and butane … to secure social peace in an economy that is marked by strong economic and social inequalities. The problem is that once the price of the barrel plummets, these subsidies will disappear and we will witness the social tensions.

Oil and poor governance

In general, we can say that the development indicators of African oil-exporting countries are no better than those of importing countries. The rent of oil does not necessarily lead to economic development. There is only one exception at the moment, as is the case with Chad, which has an oil development program with the World Bank to put oil revenues at the service of economic development. We can also deduce that there is a negative correlation between oil and governance because we think that governance rates are better for importing countries than for exporting countries. Often the bonuses paid during the exploration contract, the loans on future production are still for the benefit of some people and not the entire nation.

China's appetite for raw materials is another problem for African countries as a very export-oriented economy, so a sudden drop in commodity prices can easily push the economies of these countries into crisis. At the same time, some East African countries managed to diversify their economies without relying on commodities. In 2016, the IMF found that the public debt of oil-exporting countries has increased considerably, with an increase of 20 percentage points of GDP since 2013.

We have found that oil-exporting countries are not ahead of non-exporters of problems for a variety of reasons. The only way for Senegal to seize oil is to pretend that oil does not exist. During the exploration phase, it would be wiser to do what none of these oil-exporting countries did to develop their primary and secondary sectors to have a good base. If these two sectors are developed seriously, oil revenues can benefit us, but otherwise we will see total disinterest in other sectors, which will increase poverty and unemployment. We will not escape the "Dutch disease" like all these oil-exporting nations before us. Will we be able to learn from the mistakes of the nations that preceded us in oil exports, or will we be just another victim of this oil curse?

Mohamed Dia, banking consultant

email: [email protected]


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